After Character.AI filed for bankruptcy, what will happen to its user data?
Now that Character.AI is going bankrupt, what happens to all of its users’ data?
New York State Attorney General Letitia James, along with a total of 40 bipartisan state attorneys general from other states, filed a notice of interest in the Character.AI bankruptcy case, demanding additional protections for consumer data in the bankruptcy sale. Character.AI announced Tuesday that it filed for Chapter 11 bankruptcy and will sell some assets to Disney. The states warned that, given the highly sensitive nature of users' conversations with the chatbot, the large number of minor users, and the risks of the product's specific features, the technology transfer could pose serious risks. The states said they have been investigating consumer protection and privacy issues since 2024, prompted by a lawsuit filed by the mother of a 14-year-old boy who allegedly died by suicide within seconds after talking to the chatbot. The James office said the investigation found that the chatbot impersonated licensed professionals, exposed users to pornographic and violent content, had weak age verification, made misleading safety claims, and may have violated state privacy laws.
Multiple state attorneys general are seeking additional protections for sold user data in the Character.AI bankruptcy proceedings, illustrating a regulatory path for handling user conversation data when an AI company goes bankrupt.